Tuesday, February 16, 2016

A pernicious facet of wholesale crony capitalism is its susceptibility to being marketed as morally benign. Crony capitalists justify favoring certain groups, whether the Communist party in Vietnam, historically under-represented U.S. minority groups, or labor unions on the grounds that these groups are deserving of favoritism. The problem with that argument is that crony capitalism is deeply damaging to the economies that allow ordinary individuals to thrive. It has pernicious effects on incentives to invest in education and entrepreneurial activity because, under crony capitalism, connections lead to advancement, not educational achievement or entrepreneurial creativity.